Warren Buffett

Ten great investors

1. Warren Buffett

Job description
Chief executive officer, Berkshire Hathaway Holdings, an investment firm headquartered in Omaha, Nebraska, USA.

Investment style

Originally a value investor interested chiefly in assets, Buffett has since become a long-term growth investor.

Profile
Buffett is a phenomenon. In 1986, he was briefly the richest man in the world, with a net worth of $16bn, thanks entirely to his stockpicking skills and fee income from investment management. He is now worth over $20bn. Yet he started out in 1954 with just $100 to invest. After training as a broker with Benjamin Graham, he founded an investment partnership, with himself as manager. This he ran until 1969, when he disbanded it in the face of dangerously high stock market valuations.

In 1965, he bought ailing textile firm Berkshire Hathaway. It was to become a holding company for a range of investments in media, insurance and consumer companies. He bought many of them at very low prices in the 1973-4 recession. This helped to keep his rates of return well ahead of the market during the Seventies and early Eighties.

Buffett was already a legend in the investment community by the time he bought a huge stake in Coca-Cola in 1988. But it was not until the success of that purchase that he became a folk hero too. He has since become a symbol of all that is best about the old-fashioned, down-to-earth values of mid-Western America. A gift for witty anecdote and example, displayed in college lectures and annual reports, has helped to spread his reputation far beyond the confines of Wall Street and the happy band of investors he has turned into millionaires.

Long-term returns
Buffett is widely regarded as the most successful investor of all time, with a compound return of around 22.3% over 36 years.

Biggest success
Buffett's purchase of Coca-Cola has made his investors a profit of around 800% over 12 years. Less well-known is his investment in advertising group Interpublic in 1973, which brought gains of over 900% in a little over 11 years.

Method and guidelines
Shares are not mere pieces of paper. They represent part-ownership of a business. So when contemplating an investment, think like a prospective owner. Focus on the underlying business, not the stock. What does it do? How well does it do it?

Stick to businesses you understand. Otherwise, you will never be able to grasp the true value of what you own.

There are only a few businesses worth buying. The world is divided into a handful of great businesses and a mass of poor or mediocre ones. Narrow your search down to the former.

"An investor should act as though he had a lifetime decision card with just twenty punches on it. With every investment decision his card is punched, and he has one fewer available for the rest of his life."

The best businesses are like toll bridges, which their customers have to pay to cross if they want to reach their destination. This enables them to piggyback on the growth of other, less fortunately placed businesses.

• Most companies have to advertise to make their customers aware of their products and services, which means advertising companies cream off a steady percentage of their sales growth in the form of fees.
• Most men have to shave their faces daily, and most women shave their legs. As the world's leading producer of razors, Gillette has a lock on a market that will never disappear, and is expanding in line with the world's population.

Great businesses enjoy the following characteristics:

1. Simplicity - they are easily understood, and straightforward to manage
2. Strong business franchises - they benefit from 'economic goodwill', i.e. the ability to keep raising prices above the level of inflation
3. Predictability - their earnings can confidently be projected into the future
4. High returns on capital - achieved without resorting to creative accounting or excessive debt. This is even more important than headline earnings.
5. Strong cash generation - they throw off cash and do not require heavy reinvestment in assets simply to stay in business, enabling them instead to invest the cash in pursuit of even greater profits.
6. Devotion to shareholder value - the management has a significant amount of its own capital tied up in the business, and thinks of shareholders as fellow owners whose interests are identical to their own.

Estimate the intrinsic value of the business. Price is what you pay, value is what you get. Allow a sufficient 'margin of safety' between the two, so that, in effect, you are paying 50p or 60p for £1 of value. That way, you will still be able to make a good return if your estimates err on the high side.

Buffett uses a calculation known as 'discounted cash flow', or DCF for short. This involves estimating the future cash flows of the business, and discounting these back to a present-day value by applying the rate of return you could otherwise get, with no risk, by putting your money into a benchmark bond, say 10-year UK gilts. This shows whether there is a gap between the current and projected values of the business which is wide enough to give you your margin of safety.

Click here for an example of a DCF analysis of Guinness adapted from The Warren Buffett Way by Robert Hagstrom.

Ignore the gyrations of the stock market. Buffett has said that, after buying a stock, he would not care if the market shut down altogether for ten years, since he is sufficiently confident of the intrinsic value of his holdings that he does not need the market to confirm it for him.

Sell only on one or more of the following conditions:

• If the company's intrinsic value is not increasing at a satisfactory rate
• If the market value of the company vastly exceeds its estimated intrinsic value
• When you need the cash to invest in a company that is even more attractive on the basis of the gap between its intrinsic and market values.

Key sayings"Rule Number One: Never lose money.

Rule Number Two: Never forget Rule Number One."

"Ben Graham said: 'Investment is most intelligent when it is most businesslike.' These are the nine most important words ever written about investing."

"A good business is not always a good purchase, although it is a good place to look for one."

"I would sooner buy a great business at a fair price than a fair business at a great price."

"When a management with a reputation for brilliance tackles a business with a reputation for poor economics, it is the reputation of the business that stays intact."

Further informationBuffett has, alas, not yet written a full-length book of his own. But his annual reports and speeches have been published as The Essays of Warren Buffett (1998). You can also visit his website www.berkshirehathaway.com. The most readable how-to-copy-Warren guide is Robert Hagstrom's The Warren Buffett Way (1994), which he followed up with The Warren Buffett Portfolio (1999). Here in the UK, the monthly magazine Analyst uses stock selection methods modelled closely on Buffett's.

http://www.incademy.com/courses/Ten-great-investors/T-Rowe-Price/1/1040/10002

T Rowe Price

Ten great investors

2. T Rowe Price

Job description
Until his retirement in the late Sixties, Price was the head of the investment firm he founded, T Rowe Price Associates. The firm still exists today and operates out of Baltimore, Maryland, USA.

Investment style
Cyclical investor in long-term growth companies, buying at the bottom of the business cycle and selling at the top. In later life, Price switched to a more value-driven style, investing in steady-growth, oil and gold stocks.

Profile
Price was a strong-willed and egotistical man. He never deviated from the daily agenda he set himself, nor from his decisions about when to buy and sell stocks. He demanded the same zeal and discipline from his employees. This unforgiving work ethic turned his firm into one of the largest asset managers of his day.
Price was very much an entrepreneur rather than a manager. He liked to start a fund, establish it and then move on to launch another one. Some of his most famous funds are still running today: T Rowe Price Growth Stock, New Horizons and New Era. His favourite companies, such as Avon Products and Black and Decker, actually became known as 'T Rowe Price stocks'.

But he sold the business to his associates when he saw that the prices of this group of companies were reaching absurd levels in the late Sixties. He himself changed to a more cautious and diversified approach, buying bonds and stocks from the energy and commodity sectors. The 1973-4 bear market proved the wisdom of this decision. His family portfolios soared, while those of his old firm collapsed.

Long-term returns
Price published a sample family portfolio to show how he had turned $1,000 invested in 1934 into $271,201 by the end of 1972 - a compound return of about 15.4% over 39 years.

Biggest success
Price's sample portfolio contained many striking successes. Among the most remarkable was pharmaceuticals firm Merck, bought for the equivalent of 37.5 cents in 1940 and still held 32 years later at $89.13 - a compound growth rate of about 18.6%, even without any reinvestment of dividends.

Method and guidelines
Like people, companies pass through three phases in their life cycle:

1. Growth
2. Maturity
3. Decadence

Look for companies in the earliest identifiable phase of growth. This growth is of two kinds:

1. Cyclical - growth in unit volumes of sales and in net earnings, which peaks at progressively higher levels at the top of each succeeding business cycle. These stocks are ideal for investors looking for capital gains during the recovery stage of the business cycle
2. Stable - growth in unit volumes and in net earnings, which persists through the downturn in the business cycle. These stocks are suitable for investors who need relatively stable income.

Concentrate on industry leaders. These can usually be identified by their competitive advantages, including:

• Outstanding management
• Leading-edge research and development
• Patents, licences and other legally enforceable product rights
• Relative protection from government regulation
• Low labour costs, but good labour relations

These advantages usually go hand-in-hand with

• A strong balance sheet
• A high return on capital (at least 10%)
• High profit margins
• Consistently above-average earnings growth.

If these financial ratios are improving, that is often a good indicator that the company is still in its growth phase.

The best time to consider buying is when growth stocks are out of fashion. As a group, their P/E ratio will have fallen to roughly the same level as the market. Consider buying when the P/E is about 33% higher than the lowest point it has reached at the bottom of the last few cycles. Continue buying ('scaling in') until the price starts to rise strongly above this initial level.

The time to start selling is when the stock is 30% above your upper buying price limit. Sell off your stock gradually ('scale out') as the price continues to advance. (Price himself sold 10% every time the price rose 10%. Smaller investors may need to think in terms of selling 25-33% on each 20% advance.)

Also consider selling if

• You can be reasonably certain the bull market has peaked
• The company appears to be entering its mature phase
• The company reports bad news
• The stock price collapses on widespread selling.

Key sayings
"Even the amateur investor who lacks training and time to devote to managing his investments can be reasonably successful by selecting the best-managed companies in fertile fields for growth, buying their shares and retaining them until it becomes obvious that they no longer meet the definition of a growth stock."

"'Growth stocks' can be defined as shares in business enterprises that have demonstrated favourable underlying long-term growth in earnings and that, after careful research study, give indications of continued secular growth in future...Secular growth extends through several business cycles, with earnings reaching new high levels at the peak of each subsequent major business cycle..."

Further information
Start with John Train's profile in The Money Masters (1980). For Price's own views, see the extract 'Picking 'Growth' Stocks' in The Investor's Anthology, edited by Charles Ellis.

http://www.incademy.com/courses/Ten-great-investors/T-Rowe-Price/2/1040/10002

Malaysia Refrains From Raising Interest Rate as Rebound Cools

September 02, 2010, 12:01 PM EDT

By Shamim Adam

Sept. 3 (Bloomberg) -- Malaysia’s central bank left interest rates unchanged after three consecutive increases, choosing to support growth as the global recovery slows.

Malaysia started raising interest rates before any other Asian central bank this year to reduce what officials say is the risk of financial imbalances caused by keeping borrowing costs too low for too long. The region’s efforts to withdraw monetary stimulus introduced to counter last year’s global recession may slow as policy makers from the U.S. to Japan take steps to shore up growth amid signs their economies are cooling.

“The second-half outlook is gloomier globally and the strength in the Malaysian economy will be unlike what we saw in the first half,” said Wellian Wiranto, a Singapore-based economist at HSBC Holdings Plc. “It looks like they are done for the year and the question now is whether they are going to keep it unchanged for much of 2011. With Malaysia being one of the first ones to move, 2.75 percent may be what they deem as normal.”

Exports by Malaysian companies such as Sime Darby Bhd. and Unisem (M) Bhd. rose at the slowest pace in eight months in July, a report from the trade ministry showed yesterday.

Exports Cool

Malaysia’s export growth has slowed in recent months along with shipments from other countries in the region, the central bank said. “These conditions are expected to continue with the slowing of global growth,” it said.

Still, Malaysia’s growth will be supported by “robust domestic economic activity” even as the external developments may moderate the pace of expansion, Bank Negara said.

The ringgit is the best performer in Asia excluding Japan in 2010 as the economy strengthened and the central bank raised rates. The currency, which has gained 9.5 percent this year, traded at 3.1275 per dollar at 6:31 p.m. yesterday.

Malaysia’s economy, the largest in Southeast Asia after Indonesia and Thailand, grew near the fastest pace in a decade last quarter, with gross domestic product climbing 8.9 percent from a year earlier. Governor Zeti Akhtar Aziz said last month growth may exceed 6 percent in 2010 even as the expansion in advanced economies may ease in the second half.

Ahead of Curve

“Bank Negara is slightly ahead of the curve compared to its regional peers in normalizing rates,” Lee Heng Guie, chief economist at CIMB Investment Bank in Kuala Lumpur, said before the decision. “More signs of global weakness, in particular growing concerns over a double-dip recession in the U.S., a moderate pace of domestic growth and the fading effects of fiscal stimulus” may prompt Malaysia to pause the rest of the year, he said.

The U.S. economy grew at a 1.6 percent annual pace in the second quarter, less than previously estimated. Japan expanded at the slowest pace in three quarters in the period ended June 30 as global demand cooled and stimulus effects wore off.

Thailand’s Move

Other Asian central banks are still raising rates to curb inflationary pressures as their economies expand. The Bank of Thailand raised its benchmark on Aug. 25 and signaled further increases after the economy overcame political unrest to grow faster than estimated last quarter.

The Reserve Bank of India has boosted its key rate more times than any other Asian counterpart this year to cool consumer prices that are rising at more than 11 percent. The Bank of Korea is alert to inflation and may need to raise interest rates again even with a slower-than-expected global recovery, central bank Governor Kim Choong Soo said last week.

“The Monetary Policy Committee considers the current monetary policy as appropriate and consistent with the latest assessment of the economic growth and inflation prospects,” Malaysia’s central bank said. At the current level of the benchmark rate, “the stance of monetary policy continues to remain accommodative and supportive of economic growth.”

Malaysia’s rate increase in March was the first in almost four years. The overnight policy rate was kept at 3.5 percent from late April 2006 until late November 2008, when the central bank started to cut the benchmark, bringing it to a record-low 2 percent in February 2009.

The central bank’s final policy review of 2010 will be in November.

--With assistance from Michael Munoz in Hong Kong. Editors: Stephanie Phang, Lily Nonomiya

%MYR

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net

To contact the editor responsible for this story: Chris Anstey in Tokyo at canstey@bloomberg.net

http://www.businessweek.com/news/2010-09-02/malaysia-refrains-from-raising-interest-rate-as-rebound-cools.html

Malaysia Rally May Pause After Evening Star: Technical Analysis

Bloomberg

 

September 02, 2010, 12:17 AM EDT

By Chan Tien Hin

 

Sept. 2 (Bloomberg) -- Malaysia’s stock market rally to the highest level in more than 30 months may pause after a chart of the benchmark index formed a so-called Evening Star, signaling a “bearish trend,” according to RHB Research Institute Sdn.

The candle-chart image comprising a line with a long “real body” followed by a line with a short body suggests the prior trend may end. The FTSE Bursa Malaysia KLCI Index, which closed at 1,432.95 yesterday, could retreat to “retest” the 10-day moving average of 1,405 and the “psychological” level of 1,400, RHB said in a report today.

“So long as it can sustain at above these levels with robust daily turnover at between 800 million shares to 1 billion shares, buying momentum can return swiftly to lead another rally,” RHB said. Trading volume averaged 810 million shares in the past six months, according to data compiled by Bloomberg.

The index, Asia’s second-best performer last month, has surged 15 percent since the May 26 low, approaching the 20 percent jump that defines as a bull market for some investors. Stocks will extend gains in September with government reforms and a stronger ringgit drawing investors, OSK Research Sdn. analyst Chris Eng said yesterday.

The stock index may rise to 1,500 by the end of the year, HwangDBS Vickers Research Sdn. said in a report today, raising its earlier forecast of 1,448 amid stronger earnings growth prospects.

The index today climbed for a fifth day, adding 0.1 percent to 1,432.97 as of 11:43 a.m. local time, set for its highest close since Feb. 14, 2008.

Candlestick charts show an index or security’s high, low, open and close each day, and may signal a reversal of a trend or a continuation. In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

--Editor: Reinie Booysen, Linus Chua
To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net
To contact the editors responsible for this story: Linus Chua at lchua@bloomberg.net

http://www.businessweek.com/news/2010-09-02/malaysia-rally-may-pause-after-evening-star-technical-analysis.html

Nine Malaysian firms on Forbes’ ‘best under a billion’ list

Nine Malaysian firms on Forbes’ ‘best under a billion’ list

By Lee Wei Lian

September 02, 2010

 

KUALA LUMPUR, Sept 2 — Nine Malaysian companies have made it to Forbes magazine’s ranking of best performing listed Asian companies with revenues under US$1 billion (RM3.1 billion).

Malaysia tied with Thailand for the sixth most number of entries on the list after China/Hong Kong with 71, India (39), South Korea (20), Taiwan (19) and Australia (13).

Singapore had eight entries on the list while Japan had two, down from 24 due to domestic economic woes.
“In aggregate the market-cap-weighted shares of our 2010 class were up 43 per cent over 12 months versus 21 per cent for the FTSE Asia Pacific Small Cap stock index,” said Forbes.

The nine Malaysian entries this year represented an increase of one over the eight entries it had on the list last year.

One Malaysian newcomer to the list, glove maker Hartalega Holdings, was profiled by the magazine.
The other companies were RFID solutions provider CBS Technology, marine services provider Coastal Contracts, herbal care multi-level marketing company Hai-O Enterprise, steel pipe maker KKB Engineering, glove maker Latexx Partners, construction company Mudajaya Group, e-government service provider My EG Services and IT firm Willowglen MSC.

The Singaporean entries were real estate fund manager ARA Asset Management, marine equipment manufacturer Baker Technology, furniture maker Design Studio Furniture, engineering outfit Hiap Seng Engineering, property developer Ho Bee Investment, infrastructure builder OKP Holdings, clean room supplier Riverstone Holdings and mining company Straits Asia Resources.

This year also marked the first time a Vietnamese company made it to the list — dairy outfit Vinamilk.

“Its history reflects the different nature of enterprises in nations with long-standing state dominance,” said Forbes.

The annual “Best Under A Billion” list picks the top-performing 200 firms from close to 13,000 listed Asia-Pacific companies with actively traded shares and sales of between US$5 million and US$1 billion.
Selection of the final 200 was based on earnings growth, sales growth, and shareholders’ return on equity in the past 12 months and over three years.

Prime Minister Datuk Seri Najib Razak said recently that small-medium enterprises (SMEs) are the backbone of the Malaysian economy.

SMEs contribute about one-third of Malaysia’s GDP and account for 20 per cent of its exports.

http://www.themalaysianinsider.com/business/article/nine-malaysian-firms-on-forbes-best-under-a-billion-list/

Ordinary Malaysians shun stock market amid stalling recovery

By Yow Hong Chieh

September 01, 2010

Individual investors began fleeing the local market in 1997, and have yet to return. — Reuters pic

KUALA LUMPUR, Sept 1 — Individual investors continue to shun the Malaysian stock market as public confidence remains shaky due to fears that the market’s recovery following the 2007 US sub-prime mortgage crisis may not be real.

Economists and analysts said that a slowdown in foreign investments, poor enforcement against unscrupulous activities and overseas competition for local funds also contributed to the lack of interest among ordinary Malaysians in investing in the local share market.

Kenanga Investment Bank economist Wan Suhaimie Wan Saidie said most investors were tired of the Malaysian stock market, which was not as competitive as other bourses in the region, and added that participation was also muted due to the lack of foreign direct investment (FDI).

“There is a correlation between retail participants and foreign investment flows,” he said, referencing the massive 81.1 per cent drop in foreign direct investment (FDI) Malaysia experienced last year.

“If foreign investment flows are not forthcoming individual investors are more likely to shun the local market.”
He said there was a possibility that investors might “go back to hibernation” until they saw signs of a firm recovery, but cautioned that the flow information both locally and abroad did not suggest that things were getting any better.

Until then, however, investors still had many other options to buy both locally and abroad or put their money into properties and commodities, he explained.

The Kuala Lumpur Composite Index’s 45 per cent gain last year lagged behind Southeast Asian neighbours even after the government announced stimulus plans totalling RM67 billion to help pull the region’s third-largest economy out of a recession.

The slump in trading by individuals coincided with an exodus by foreigners from Asean’s second-biggest stock market, leaving Bursa Malaysia more reliant on domestic institutional funds.

Overseas investors have sold a net RM1.36 billion of Malaysia’s equities this year, adding to RM8.57 billion withdrawn in 2009 and RM38.6 billion that flowed out in 2008, paring their share of local stocks down to 20.6 per cent at the end of April from 27.5 per cent in April 2007.

Wan Suhaimie was critical of the level of participation in the market by statutory funds such as Employees Provident Fund (EPF), which he said distorted the market as they focused only on index-linked stocks.
On March 30, Prime Minister Datuk Seri Najib Razak revealed that the state-controlled EPF accounted for 50 per cent of daily trading volume in the equity and bond markets. Additionally, more than half of the RM417.1 billion market value in the benchmark stock index is owned by government-linked funds, according to calculations by Bloomberg.

“It doesn’t really reflect the real overall performance of the stock market. Most of the information and research is skewed towards big cap stocks,” he said, adding that it was possible that investors might miss out on smaller companies that have better growth potential because of this.

A Hwang-DBS remisier who wanted to be identified only as Kok explained that, during good times, retail investors make up 60 to 70 per cent of trading value in a normal market.

However, according to a Bloomberg report, trading by individuals have fallen to as low as 20 percent of trading value from more than half before the start of the 1997 Asian financial crisis, when the KLCI slumped by a record 52 per cent.

Kok said the battering individual investors took in 1997 and the recent sub-prime crisis led many to put their money in safer alternatives like unit trusts or sukuks (Islamic bonds), adding that many were also still holding onto stocks that had yet to recover.

“With the market in such a lacklustre mode, you can’t make money punting,” he said. “The market is just drifting. The main market movers are just blue chip index counters... Most retail investors are still on the sidelines nursing their wounds.”

“Any spare money they’ll probably keep in interest-bearing accounts or, if they have more money, they’ll probably just park it with a fund manager.”

Most individual savings started shifting to mutual funds and unit trusts since Malaysia’s economy went into a recession in 1998 but have not returned to stock trading even as the economy expanded at an annual average of five percent over the past decade and the benchmark index more than doubled, Bursa Malaysia CEO Yusli Mohamed Yusoff said in June.

In order to boost retail investors’ share of trading to closer to one-third and tap into Southeast Asia’s second-highest savings rate, Bursa is currently working with brokerages and banks to encourage investors to open up accounts and pursue online trading.

However, Kok said he felt that investors were still wary of trading on the market because they were not convinced that Malaysia’s economic recovery was real.

“When you talk about six or seven per cent (GDP) growth, I suppose you and I don’t see it,” he said.

A broker with a local investment bank who declined to be named was similarly sceptical of the strength of the market’s recovery, pointing out that the KLCI, which is used as a bellwether for the Malaysian stock market, focused only on selected blue chip stocks.

“It is very obvious that the index, targeting only 30 counters, is not a true reflection of the overall market. A lot of the companies are actually really going down,” she said.

“Because the downtrend from ‘07, until today, in terms of all those general stocks that people buy and sell, a lot of them are still very much at the bottom.”

She added that retail investors have also been “very quiet” partly because they had lost confidence in market regulators, citing the recent case of furniture make Kenmark Industrial Co Bhd.

Kenmark’s troubles began in late May when its Taiwanese managing director James Hwang disappeared mysteriously — leading to a plunge in share price and plant closures in Port Klang and Vietnam — only to resurface nearly a week later, claiming his absence was due to illness.

During Hwang’s absence, Datuk Ishak Ismail entered the market and amassed shares amounting to a 32.36 per cent stake in the company over 10 days at prices of between 5.8 sen and 6.0 sen, claiming he had done so to help out his friend Hwang and offer re-employment to the company’s workers.

However, Ishak later sold his direct and indirect stake in Kenmark between June 9 and June 11 at between 14 sen and 16 sen after failing to convince Hwang to return to the company.

The Securities Commission finally stepped in on June 16 when it obtained a High Court order to stop Ishak from using or dealing with the RM10.16 million proceeds from the sale of shares in Kenmark as part of a move to probe possible insider trading.

Kenmark’s share price plummeted from a high of RM0.85 to just RM0.07.

“Stocks can drop from a dollar to penny stocks... These sorts of events happen in the Malaysian market, yet the authorities are not taking action,” the remisier said.

“A company doesn’t just fold up within a month. I can understand how those investors feel.”

http://www.themalaysianinsider.com/business/article/ordinary-malaysians-shun-stock-market-amid-stalling-recovery/

Free Cash Flow - FCF

What Does Free Cash Flow - FCF Mean?
A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base. Free cash flow is important because it allows a company to pursue opportunities that enhance shareholder value. Without cash, it's tough to develop new products, make acquisitions, pay dividends and reduce debt. FCF is calculated as:




It can also be calculated by taking operating cash flow and subtracting capital expenditures.

Investopedia explains Free Cash Flow - FCF
Some believe that Wall Street focuses myopically on earnings while ignoring the "real" cash that a firm generates. Earnings can often be clouded by accounting gimmicks, but it's tougher to fake cash flow. For this reason, some investors believe that FCF gives a much clearer view of the ability to generate cash (and thus profits).

It is important to note that negative free cash flow is not bad in itself. If free cash flow is negative, it could be a sign that a company is making large investments. If these investments earn a high return, the strategy has the potential to pay off in the long run.

Related Terms

• Capital Expenditure
• Free Cash Flow For The Firm
• Free Cash Flow Per Share
• Free Cash Flow To Sales
• Free Cash Flow Yield
• Indirect Method
• Operating Cash Flow - OCF
• Price to Free Cash Flow
• Shareholder Value
• Target Cash Balance
• More Related Terms

 

Related Links:

• Free Cash Flow: Free, But Not Always Easy - Free cash flow is a great gauge of corporate health, but it's not immune to accounting trickery.
• Taking Stock Of Discounted Cash Flow - Learn how and why investors are using cash flow-based analysis to make judgments about company performance.
• Free Cash Flow Yield: The Best Fundamental Indicator - Cash in the bank is what every company strives to achieve. Find out how to determine how much a company is generating and keeping.
• Where Top Down Meets Bottoms Up - Find the investing "sweet spot" by combining these two styles.
• Top 3 DCF Analysis Pitfalls - This method can be difficult to apply to real-life valuations.
• Investment Valuation Ratios: Price/Book Value Ratio - This ratio indicates, how much shareholders are paying for the company''s net assets. See this section for an indepth look at this ratio and its calculation.
• Analyze Cash Flow The Easy Way - Find out how a company spends its money and whether there will be any left over for investors.
• Using DCF In Biotech Valuation - Valuing firms in this sector can seem like a black art, but there is a systematic way to pin a price on potential.
• Debt Ratios: Cash Flow To Debt Ratio - Cash Flow to Debt Ratio measures the company''s ability to cover debt form its yearly cash flows. See this section for a detailed explanation and calculations.
• Cash Flow Indicator Ratios: Introduction - An introduction to Cash Flow Indicator ratios.
• DCF Analysis: The Forecast Period & Forecasting Revenue Growth - Determine how far out into the future you should project cash flow.
• The Essentials Of Cash Flow - Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
• Warning Signs Of A Company In Trouble - Don't let your clients go down with ship! Learn how to escape the water with these tips.
• Spotting Cash Cows - We show you why some of these companies stand apart from the herd.

http://www.investopedia.com/terms/f/freecashflow.asp

What is Free Cash Flow?

FCF, or free cash flow, is net income earned from a business venture along with any depreciation or amortization that is relevant to the company. The amount of free cash flow does allow for any changes in the amount of working capital on hand as well as any shifts in capital expenditures for the period under consideration. It is free cash flow that is used by the company to honor its obligations to stockholders and others who hold debt or equity in the corporation. While not free cash in the sense that the funds can be used for anything, the cash flow is free in that it is not required to maintain the basic production functions of the company.

Calculating this cash minus expenditures involves knowing such important line items as current depreciation on property, the value of intangible assets after allowing for amortization, any interest or investment income received, returns from the sale of stocks, and any monies collected as a result of selling property. Taking all these factors into consideration makes it possible to arrive at what is known as the headline operating profit. This figure serves as the starting point for determining the amount of FCF that is currently on hand and can be used to issue payments to stockholders and others who hold debt or equity instruments issued by the company.

Under the best circumstances, any company should have a healthy free cash flow at the end of each financial period. Not only is the flow of profits necessary to allow the company to honor all its financial obligations, it also provides the foundation for future expansion. That expansion may come in the form of improving existing facilities, developing and marketing new products, or creating new facilities in new locations. The presence of the free cash flow means the company is in a good position to grow and become even more profitable.

 

Related topics

Free Cash Flow

Free Cash Flow Calculation

Free Cash Flow Model

Calculating Free Cash Flow

Calculate Free Cash Flow

Free Cash Flow Firm

Debt Free Cash Flow

Stockholders are always happy when a company posts a positive free cash flow. The presence of a cash flow that is free and in the black rather than in the red means there will be no problems in receiving dividend payments and may possibly be an indicator that the company may find it feasible to issue additional shares in the near future. It also means the company is managing expenses in an efficient manner, which helps to maximize the chances for the stock holdings to continue to earn dividends in the future.

http://www.wisegeek.com/what-is-free-cash-flow.htm

What is EBITDA?

Earnings before interest, taxes, depreciation and amortization or, to give it its acronym, EBITDA, is a measure of a company's cash flow before certain deductions. It allows investors to see how much money a company is making before taxes, depreciation and amortization have been deducted. Basically, when investors place money in a company, they will want to know how much money the company has been making since their money was invested. EBITDA gives the investor an idea of how much money the company has made before its deductions. It is especially useful for a new company who has just started business and has not yet been hit with taxes, payments to creditors, and so on.

If the EBITDA figure seems to have a good growth rate, then some investors may use this figure instead of the overall net figure. It can show them that the company has a future for potential growth and that they will get a return on their investment. Investors call this looking at the EBITDA margin rather than the net margin.

There are potential problems in using the EDITDA figure. The EBITDA leaves out of lot of expenses in the final figure, so it may not be a realistic view of a company’s profitability. It also does not measure the actual cash that is flowing into the company because of the figures that it leaves out.

There are a few factors that the EBITDA neglects. These include the money required for working capital, fixed expenses and other debt payments and capital expenditures. In every business, capital expenditures are a crucial, ongoing expense. However, this is not factored into the EBITDA figure, so investors need to be wary when using the EBITDA figure as a basis for a profit margin.

There are more reliable ways for investors to calculate a company's cash income. They can use the Free Cash Flow (FCF) system. The FCF is calculated by simply deducting capital expenditures from the business cash flow figure. This takes into account at least three of the factors that the EBITDA leaves out: inventory, receivables and capital expenditures such as property and equipment.

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How to Calculate EBITDA

By an eHow Contributor 

 

I want to do this! What's This?

EBITDA stands for earnings before interest, taxes, depreciation and amortization. It is a measure to gauge the profitability of a corporation or business. A person need not have an MBA to understand financial calculations. EBITDA is not as complicated to calculate as the lengthy acronym would suggest.

Instructions

1. Calculate net income. To calculate net income obtain total income and subtract total expenses. Total income is defined as the amount of money obtained for services, labor or the sale of goods. Total expenses is defined as when a corporation uses up an asset or incurs a liability.
   
2. Determine income taxes. Income taxes are the total amount of taxes paid to federal, state and local governments.
   
3. Compute interest charges. Interest is the fee paid to companies or individuals that reimburses the individual or companies for the use of credit or currency.
   
4. Establish the cost of depreciation. Depreciation is the term used to define a cash (machines or property) or non-cash asset (a copyright, a trademark or brand name recognition) that loses value over time whether through aging, wear and tear or the assets becoming obsolete. There are two methods of depreciation: straight line and accelerated.
   
5. Ascertain the cost of amortization. Amortization is a method of decreasing the amounts of financial instruments over time including interest other finance charges.
   
6. Add all previously defined components. EBITDA (earnings before interest, taxes, depreciation and amortization) equals amortization plus depreciation plus interest plus net income plus income taxes. The resulting figure is then subtracted from total expense. This final figure is then subtracted from total revenue to arrive at EBITDA.
   

Read more: How to Calculate EBITDA | eHow.com http://www.ehow.com/how_2060379_calculate-ebitda.html#ixzz0yEIhiJ2i

Tips & Warnings

• EBITDA is a financial calculation that is NOT regulated by GAAP (Generally Accepted Accounting Principles) and therefore can be manipulated to a company's own ends.

EBITDA: Challenging The Calculation

by Lisa Smith (Contact Author | Biography) 

EBITDA has a bad rap in the financial world, but does this financial measure really deserve the investor distaste? EBITDA, an acronym for "earnings before interest, taxes, depreciation and amortization," is an often-used measure of the value of a business. But critics of this value often point out that it is a dangerous and misleading number, due to the fact that it is often confused with cash flow. In this article we'll show you how this number can actually help investors create an apples-to-apples comparison, without leaving a bitter aftertaste.

The Calculation

EBITDA is calculated by taking operating income and adding depreciation and amortization expenses back to it. EBITDA is used to analyze a company's operating profitability before non-operating expenses (such as interest and "other" non-core expenses) and non-cash charges (depreciation and amortization). So, why is this simple figure continually reviled in the financial industry?
The Critics

Factoring out interest, taxes, depreciation and amortization can make even completely unprofitable firms appear to be fiscally healthy. A look back at the dotcoms provides countless examples of firms that had no hope, no future and certainly no earnings, but became the darlings of the investment world. The use of EBITDA as measure of financial health made these firms look attractive.
Likewise, EBITDA numbers are easy to manipulate. If fraudulent accounting techniques are used to inflate revenues and interest, taxes, depreciation and amortization are factored out of the equation, almost any company will look great. Of course, when the truth comes out about the sales figures, the house of cards will tumble and investors will be in trouble.
Operating cash flow is a better measure of how much cash a company is generating because it adds non-cash charges (depreciation and amortization) back to net income and includes the changes in working capital that also use or provide cash (such as changes in receivables, payables and inventories). These working capital factors are the key to determining how much cash a company is generating. If investors do not include changes in working capital in their analysis and rely solely on EBITDA, they will miss clues that indicate whether a company is losing money because it isn't making any sales. (To learn more about cash flow, see The Essentials Of Cash Flow and Analyze Cash Flow The Easy Way.)

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The Cheerleaders

Despite the critics, there are many who favor this handy equation. Several facts are lost in all the complaining about EBITDA, but they are open promoted by the value's cheerleaders.

1. The first factor to consider is that EBITDA can be used as a shortcut to estimate the cash flow available to pay debt on long-term assets, such as equipment and other items with a lifespan measured in decades rather than years. Dividing EBITDA by the amount of required debt payments yields a debt coverage ratio. Factoring out the "ITDA" of EBITDA was designed to account for the cost of the long-term assets and provide a look at the profits that would be left after the cost of these tools was taken into consideration. This is the pre-1980s use of EBIDTA, and is a perfectly legitimate calculation.
   
2. Another factor that is often overlooked is that for an EBITDA estimate to be reasonably accurate, the company under evaluation must have legitimate profitability. Using EBITDA to evaluate old-line industrial firms is likely to produce useful results. This idea was lost during the 1980s, when leveraged buyouts were fashionable, and EBITDA began to be used as a proxy for cash flow. This evolved into the more recent practice of using EBITDA to evaluate unprofitable dotcoms as well as firms such as telecoms, where technology upgrades are a constant expense.
   
3. EBITDA can also be used to compare companies against each other and against industry averages.
   
4. In addition, EBITDA is a good measure of core profit trends because it eliminates some of the extraneous factors and allows a more "apples-to-apples" comparison.

Ultimately, EBITDA should not replace the measure of cash flow, which includes the significant factor of changes in working capital. Remember "cash is king" because it shows "true" profitability and a company's ability to continue operations.

Example - EBITDA Analysis The experience of the W.T. Grant Company provides a good illustration of the importance of cash generation over EBITDA. Grant was a general retailer in the time before commercial malls and was a blue chip stock of its day. Unfortunately, management made several mistakes. Inventory levels increased, and the company needed to borrow heavily to keep its doors open. Because of the heavy debt load, Grant eventually went out of business, and the top analysts of the day that focused only on EBITDA missed the negative cash flows. Many of the missed calls of the end of the dotcom era mirror the recommendations Wall Street once made for Grant. In this case, the old cliché is right: history does tend repeat itself. Investors should heed this warning.

The Caution

In both cases No.1 and No.2 listed above, EBITDA is likely to produce misleading results. Debt on long-term assets is easy to predict and plan for, while short-term debt is not. Lack of profitability isn't a good sign of business health regardless of EBITDA. In these cases, rather than using EBITDA to determine a company's health and put a valuation on the firm, it should be used to determine how long the firm can continue to service its debt without additional financing.
A good analyst understands these facts and uses the calculations accordingly in addition to his or her other proprietary and individual estimates.

The Conclusion

EBITDA doesn't exist in a vacuum. The measure's bad reputation is more a result of overexposure and improper use than anything else. Just as a shovel is effective for digging holes, but wouldn't be the best tool for tightening screws or inflating tires, so EBITDA shouldn't be used as a one-size-fits-all, stand-alone tool for evaluating corporate profitability. This is a particularly valid point when one considers that EBITDA calculations do not conform to generally accepted accounting principles (GAAPs).
Like any other measure, EBITDA is only a single indicator. To develop a full picture of the health of any given firm, a multitude of measures must be taken into consideration. If identifying great companies was as simple a checking a single number, everybody would be checking that number and professional analysts would cease to exist. (For more insight on EBITDA, read A Clear Look At EBITDA.)


by Lisa Smith (Contact Author | Biography)

Filed Under: Bonds, Fundamental Analysis, Options

 

 http://www.investopedia.com/articles/analyst/020602.asp

Value investing is, on average, successful in the long run.

Value investing

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Value investing is an investment paradigm that derives from the ideas on investment and speculation that Ben Graham & David Dodd began teaching at Columbia Business School in 1928 and subsequently developed in their 1934 text Security Analysis. Although value investing has taken many forms since its inception, it generally involves buying securities whose shares appear underpriced by some form(s) of fundamental analysis.^[1] As examples, such securities may be stock in public companies that trade at discounts to book value or tangible book value, have high dividend yields, have low price-to-earning multiples or have low price-to-book ratios.

High-profile proponents of value investing, including Berkshire Hathaway chairman Warren Buffett, have argued that the essence of value investing is buying stocks at less than their intrinsic value.^[2] The discount of the market price to the intrinsic value is what Benjamin Graham called the "margin of safety". The intrinsic value is the discounted value of all future distributions.

However, the future distributions and the appropriate discount rate can only be assumptions. For the last 25 years, Warren Buffett has taken the value investing concept even further with a focus on "finding an outstanding company at a sensible price" rather than generic companies at a bargain price.

Contents 1 History 1.1 Benjamin Graham 1.2 Further evolution 2 Value investing performance 2.1 Performance, value strategies 2.2 Performance, value investors 3 Well-known value investors 4 Criticism 5 Value investing books and resources 6 See also 7 Value Investors at Wikiquote 8 References

History

Benjamin Graham

Benjamin Graham

Value investing was established by Benjamin Graham and David Dodd, both professors at Columbia Business School and teachers of many famous investors. In Graham's book The Intelligent Investor, he advocated the important concept of margin of safety — first introduced in Security Analysis, a 1934 book he co-authored with David Dodd — which calls for a cautious approach to investing. In terms of picking stocks, he recommended defensive investment in stocks trading below their tangible book value as a safeguard to adverse future developments often encountered in the stock market.

 

Further evolution

However, the concept of value (as well as "book value") has evolved significantly since the 1970s. Book value is most useful in industries where most assets are tangible. Intangible assets such as patents, software, brands, or goodwill are difficult to quantify, and may not survive the break-up of a company. When an industry is going through fast technological advancements, the value of its assets is not easily estimated. Sometimes, the production power of an asset can be significantly reduced due to competitive disruptive innovation and therefore its value can suffer permanent impairment. One good example of decreasing asset value is a personal computer. An example of where book value does not mean much is the service and retail sectors. One modern model of calculating value is the discounted cash flow model (DCF). The value of an asset is the sum of its future cash flows, discounted back to the present.

 

Value investing performance

Performance, value strategies

Value investing has proven to be a successful investment strategy. There are several ways to evaluate its success. One way is to examine the performance of simple value strategies, such as buying low PE ratio stocks, low price-to-cash-flow ratio stocks, or low price-to-book ratio stocks. Numerous academics have published studies investigating the effects of buying value stocks. These studies have consistently found that value stocks outperform growth stocks and the market as a whole.^[3][4][5]

Performance, value investors

Another way to examine the performance of value investing strategies is to examine the investing performance of well-known value investors. Simply examining the performance of the best known value investors would not be instructive, because investors do not become well known unless they are successful. This introduces a selection bias. A better way to investigate the performance of a group of value investors was suggested by Warren Buffett, in his May 17, 1984 speech that was published as The Superinvestors of Graham-and-Doddsville. In this speech, Buffett examined the performance of those investors who worked at Graham-Newman Corporation and were thus most influenced by Benjamin Graham. Buffett's conclusion is identical to that of the academic research on simple value investing strategies--value investing is, on average, successful in the long run.

During about a 25-year period (1965-90), published research and articles in leading journals of the value ilk were few. Warren Buffett once commented, "You couldn't advance in a finance department in this country unless you taught that the world was flat."^[6]

 

Well-known value investors

Benjamin Graham is regarded by many to be the father of value investing. Along with David Dodd, he wrote Security Analysis, first published in 1934. The most lasting contribution of this book to the field of security analysis was to emphasize the quantifiable aspects of security analysis (such as the evaluations of earnings and book value) while minimizing the importance of more qualitative factors such as the quality of a company's management. Graham later wrote The Intelligent Investor, a book that brought value investing to individual investors. Aside from Buffett, many of Graham's other students, such as William J. Ruane, Irving Kahn and Charles Brandes have gone on to become successful investors in their own right.

Graham's most famous student, however, is Warren Buffett, who ran successful investing partnerships before closing them in 1969 to focus on running Berkshire Hathaway. Charlie Munger joined Buffett at Berkshire Hathaway in the 1970s and has since worked as Vice Chairman of the company. Buffett has credited Munger with encouraging him to focus on long-term sustainable growth rather than on simply the valuation of current cash flows or assets.^[7] Columbia Business School has played a significant role in shaping the principles of the Value Investor, with professors and students making their mark on history and on each other. Ben Graham’s book, The Intelligent Investor, was Warren Buffett’s bible and he referred to it as "the greatest book on investing ever written.” A young Warren Buffett studied under Prof. Ben Graham, took his course and worked for his small investment firm, Graham Newman, from 1954 to 1956. Twenty years after Ben Graham, Prof. Roger Murray arrived and taught value investing to a young student named Mario Gabelli. About a decade or so later, Prof. Bruce Greenwald arrived and produced his own protégés, including Mr. Paul Sonkin—just as Ben Graham had Mr. Buffett as a protégé, and Roger Murray had Mr. Gabelli.

Mutual Series has a well known reputation of producing top value managers and analysts in this modern era. This tradition stems from two individuals: the late great value mind Max Heine, founder of the well regarded value investment firm Mutual Shares fund in 1949 and his protégé legendary value investor Michael F. Price. Mutual Series was sold to Franklin Templeton in 1996. The disciples of Heine and Price quietly practice value investing at some of the most successful investment firms in the country.

Seth Klarman is a Mutual Series alum and the founder and president of The Baupost Group, a Boston-based private investment partnership, authored Margin of Safety, Risk Averse Investing Strategies for the Thoughtful Investor, which since has become a value investing classic. Now out of print, Margin of Safety has sold on Amazon for $1,200 and eBay for $2,000.^[8] Another famous value investor is John Templeton. He first achieved investing success by buying shares of a number of companies in the aftermath of the stock market crash of 1929.

Martin J. Whitman is another well-regarded value investor. His approach is called safe-and-cheap, which was hitherto referred to as financial-integrity approach. Martin Whitman focuses on acquiring common shares of companies with extremely strong financial position at a price reflecting meaningful discount to the estimated NAV of the company concerned. Martin Whitman believes it is ill-advised for investors to pay much attention to the trend of macro-factors (like employment, movement of interest rate, GDP, etc.) because they are not as important and attempts to predict their movement are almost always futile. Martin Whitman's letters to shareholders of his Third Avenue Value Fund (TAVF) are considered valuable resources "for investors to pirate good ideas" by another famous investor Joel Greenblatt in his book on special-situation investment You Can Be a Stock Market Genius (ISBN 0-684-84007-3, pp 247).

Joel Greenblatt achieved annual returns at the hedge fund Gotham Capital of over 50% per year for 10 years from 1985 to 1995 before closing the fund and returning his investors' money. He is known for investing in special situations such as spin-offs, mergers, and divestitures.

Charles de Vaulx and Jean-Marie Eveillard are well known global value managers. For a time, these two were paired up at the First Eagle Funds, compiling an enviable track record of risk-adjusted outperformance. For example, Morningstar designated them the 2001 "International Stock Manager of the Year" and de Vaulx earned second place from Morningstar for 2006. Eveillard is known for his Bloomberg appearances where he insists that securities investors never use margin or leverage. The point made is that margin should be considered the anathema of value investing, since a negative price move could prematurely force a sale. In contrast, a value investor must be able and willing to be patient for the rest of the market to recognize and correct whatever pricing issue created the momentary value. Eveillard correctly labels the use of margin or leverage as speculation, the opposite of value investing.

Christopher H. Browne of Tweedy, Browne was well known for value investing. According to the Wall Street Journal, Tweedy, Browne was the favorite brokerage firm of Benjamin Graham during his lifetime; also, the Tweedy, Browne Value Fund and Global Value Fund have both beat market averages since their inception in 1993.[2] In 2006, Christopher H. Browne wrote The Little Book of Value Investing in order to teach ordinary investors how to value invest.[3]

 

Criticism

An issue with buying shares in a bear market is that despite appearing undervalued at one time, prices can still drop along with the market.^[9] Conversely, an issue with not buying shares in a bull market is that despite appearing overvalued at one time, prices can still rise along with the market.

Another issue is the method of calculating the "intrinsic value". Two investors can analyze the same information and reach different conclusions regarding the intrinsic value of the company. There is no systematic or standard way to value a stock.^[10]

 

Value investing books and resources

• Security Analysis, editions 1934,^[11] 1940^[12], 1951^[13] and 1962^[14] and 1988 ^[15] and 2008 ^[16] ISBN 978-0-07-159253-6
• "Value Investing Made Easy," Janet Lowe, McGraw-Hill. ISBN 978-0070388642
• The Theory of Investment Value (1938), by John Burr Williams. ISBN 0-87034-126-X
• The Intelligent Investor (1949), by Benjamin Graham. ISBN 0-06-055566-1
• You Can Be a Stock Market Genius (1997), by Joel Greenblatt. ISBN 0-684-84007-3.
• Contrarian Investment Strategies: The Next Generation (1998), by David Dreman. ISBN 0-684-81350-5.
• The Essays of Warren Buffett (2001), edited by Lawrence A. Cunningham. ISBN 0-9664461-1-9.
• The Little Book That Beats the Market (2006), by Joel Greenblatt. ISBN 0-471-73306-7.
• The Little Book of Value Investing (2006), by Chris Browne. ISBN 0-470-05589-8.
• Value Investor Insight (www.valueinvestorinsight.com)
• "The Rediscovered Benjamin Graham - selected writings of the wall street legend," by Janet Lowe. John Wiley & Sons
• "Benjamin Graham on Value Investing," Janet Lowe, Dearborn

 

See also

Contrarian investing Index investing Growth investing Quality investing Socially responsible investing Ethical investing Appreciation Capital accumulation Financial economics Magic Formula Investing

Investment management Investor profile Investor relations Momentum investing Return on investment Saving Speculation Stock investor Value (economics) Value averaging Chepakovich valuation model

 

Value Investors at Wikiquote

• Warren Buffett
• Benjamin Graham
• Joel Greenblatt

 

References

1. ^ Graham, Benjamin (1934). Security Analysis New York: McGraw Hill Book Co., 4. ISBN 0-07-144820-9.
2. ^ Graham (1949). The Intelligent Investor New York: Collins, Ch.20. ISBN 0-06-055566-1.
3. ^ The Cross-Section of Expected Stock Returns, by Fama & French, 1992, Journal of Finance
4. ^ Firm Size, Book-to-Market Ratio, and Security Returns: A Holdout Sample of Financial Firms, by Lyon & Barber, 1997, Journal of Finance
5. ^ Overreaction, Underreaction, and the Low-P/E Effect, by Dreman & Berry, 1995, Financial Analysts Journal
6. ^ Joseph Nocera, The Heresy That Made Them Rich, The New York Times, October 29, 2005
7. ^ Warren Buffett's 1989 letter to Berkshire Hathaway shareholders
8. ^ The $700 Used Book. (2006, Aug. 7). BusinessWeek, Personal Finance section. Accessed 11-11-2008.
9. ^ When Value Investing Doesn't Work
10. ^ [1]
11. ^ Graham and Dodd. 1934. Security Analysis: Principles and Technique, 1E. New York and London: McGraw-Hill Book Company, Inc.
12. ^ Graham and Dodd. 1940. Security Analysis: Principles and Technique, 2E. New York and London: McGraw-Hill Book Company, Inc.
13. ^ Graham et al. 1951. Security Analysis: Principles and Technique, 3E. New York: McGraw Hill Book Company, Inc.
14. ^ Graham et al. 1962. Security Analysis: Principles and Technique, 4E. New York: McGraw-Hill Book Company, Inc.
15. ^ Graham and Dodd. 1988. Security Analysis: Principles and Technique, 5E. McGraw-Hill Professional
16. ^ Graham and Dodd. 2008. Security Analysis: Principles and Technique, 6E. McGraw-Hill Professional

http://en.wikipedia.org/wiki/Value_investing